Income tax changes you need to know

 

The Climate Action Incentive is here, new EI parental sharing benefits are introduced, additional medical expenses can be claimed and more

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CNW - Tax season is officially around the corner, and a new year means new tax laws come into effect. As Canadians start to collect tax slips and prepare to file, they should ensure they’re aware of how these laws will impact their return.

Below are the tax laws most likely to have the biggest impact on returns.

Introducing the Climate Action Incentive. 


As part of the Government of Canada’s climate change plan, residents of Saskatchewan, New Brunswick, Ontario and Manitoba and will receive a new tax credit called the Climate Action Incentive when they file their 2018 tax return in early 2019.

“The government estimates that the average household will receive an incentive of $598 in Saskatchewan, $248 in New Brunswick, $300 in Ontario and $336 in Manitoba,” said Lisa Gittens, senior tax expert at H&R Block. “People who live in more rural areas will get 10 per cent more than those in cities to account for the fact that they likely use more energy and that they don’t have as many public transportation options as a way to reduce their fuel consumption.”

New EI parental sharing benefits are here.


As part of the 2018 federal budget, a supplemental “parental sharing benefit” was proposed, which will provide an additional five weeks of benefits when both parents agree to share parental leave, designed to provide greater flexibility to families. As well, the Working While on Claim rules now apply to sickness and maternity benefits. While on maternity leave, some women choose to return to work early, before their EI benefits end. This is allowed and doable, but requires an adjustment in how much they receive in their benefits. A claimant receives 55 per cent of their weekly salary as their EI benefit. When they return to work, they must subtract 50 cents of each dollar they earn, and this amount will be subtracted from their overall EI benefit.

For example: Before mat leave, Riya earned $500/week, and her EI benefit is 55 per cent of this, so she receives $275/week while on maternity leave. She returns back to work part time, for a total of $300/week salary. She needs to subtract 50 cents of each dollar earned ($150) from her EI benefit. Now her EI benefit is $125/week, plus she keeps her weekly salary, so her total earnings will be $425.

More medical expenses can be claimed.


Effective this year, taxpayers suffering from a severe mental impairment will be able to claim the costs of caring for a service animal to help cope with such tasks as guiding a disoriented patient, searching the home of a patient with severe anxiety before they enter, and aiding a patient experiencing night terrors. However, animals that provide comfort or emotional support but have not been specially trained to perform the tasks above will not be eligible.

“Foreign-Born Status Indians” are now eligible for the Canada Child Benefits.

When the Canada Child Benefit (CCB) was revamped in 2016, eligibility was extended to “foreign-born status Indians,” who are individuals that reside in Canada and are Indians under the Indian Act but are neither Canadian citizens nor permanent residents under the Immigration and Refugee Protection Act.  

“Under the rules for the existing CCB, these individuals were not eligible,” said Gittens. “As the result of measures contained in the 2018 budget, these same taxpayers will be allowed to retroactively apply for CCB for the 2005 taxation year through to June 30, 2016.”

Accelerated capital cost allowance (CCA) rates. 


The federal Fall Economic Statement included a temporary change to the half-year rule for claiming CCA, which will have an impact on Canadian business owners. The change takes effect for purchases of depreciable equipment (such as computers or furniture) made on or after Nov. 21, 2018 and before 2024 and will affect the amount that may be claimed on the 2018 tax return. The new measure, referred to as the “Accelerated Investment Incentive,” allows for 150 per cent of the normal CCA rate to be claimed. The amount of CCA that could be claimed in the year of purchase was previously 50 per cent meaning the amount that can be claimed has tripled.

The small business corporate tax rate is reduced.


The small business corporate tax rate was reduced from 10.5 per cent to 10 per cent effective for 2018 and will be further reduced to 9 per cent for 2019.

The home relocation loan has been eliminated. 


Under changes proposed by Budget 2017, the home relocation loans deduction will be eliminated for 2018 and subsequent years.

Veterans retirement income security benefits now qualify for pension splitting.


Retirement income security benefits received by veterans are now eligible for pension income splitting. This provision is retroactive to 2015. The amount that can be split is subject to a cap of $103,056 for 2018.

Canadians are encouraged to take time to understand how the above law changes will affect their 2018 filing. For a full list of all tax law changes visit the Canada Revenue Agency website.

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